Question

Perth Corporation owns 90 percent of Dundee Company's stock. At the end of 20X8, Perth and Dundee reported the following partial operating results and inventory balances:PerthCorporation DundeeCompanyTotal sales $500,000 $350,000Sales to Dundee Company 100,000 Sales to Perth Corporation 150,000Net income 15,000Operating income (excluding investment income from Dunde) 56,000 Inventory on hand, December 31, 20X8, purchased from: Dundee Company 36,000 Perth Corporation 31,000Perth regularly prices its products at cost plus a 30 percent markup for profit. Dundee prices its sales at cost plus a 10 percent markup. The total sales reported by Perth and Dundee include both intercompany sales and sales to nonaffiliates.Based on the information given above, what balance will be reported for inventory in the consolidated balance sheet for December 31, 20X8?$56,573$23,846$32,727$67,000

Answer 1

Answer:

The correct option is a. $56,573

Explanation:

For computing the correct amount of inventory for both Perth and the Dundee, we have to exclude the profit portion from the inventory amount.

In mathematically,

Perth corporation inventory = Inventory ÷ (100 + markup profit)

                                              = $31,000 ÷ (100 + 30%)

                                              = $31,000 ÷ 130%

                                              = $23,846

Dundee company inventory = Inventory ÷ (100 + markup profit)

                                               = $36,000 ÷ (100 + 10%)

                                               = $36,000 ÷ 110%

                                               = $32,727

So, the total inventory would be equal to

= Perth corporation inventory + Dundee company inventory

= $23,846 + $32,727

= $56,573

Hence, the $56,573  will be reported for inventory in the consolidated balance sheet for December 31, 20X8

Therefore, the correct option is a. $56,573